Small businesses are the lifeblood of New Jersey’s economy, with over 820,000 small businesses operating in the NJ state, in line with the U.S. Small Business Administration (SBA) Office of Advocacy. For these small businesses, getting funding can affect their ability to execute their business and develop. Many small businesses find success working with the SBA, which establishes policies for loans made by third party consisting of banks and community development firms.
SBA loans can be a help to small businesses that might not be approved for traditional funding, because the SBA loan allows approvals even when the down payment or cash flow is just too low. The SBA loans also present longer terms, reducing the refinancing need, creating lower monthly payments with the help of spreading them over a couple of more years. This is viable, at some extent, because the Small Business Administration ensures a part of loans will be repaid, reducing some of the lender’s risk.
SBA LOAN PROGRAMS
There are two major forms of SBA loans:
SBA 7(a) Loan:
The SBA’s key program enables small businesses get funding for preferred business functions, consisting of working capital; buying or renovating office space; buying business equipment or furnishings and refinancing debt. Business loans of up to $5 million are issued with terms of up to 10 years for working capital and 25 years for fixed assets.
This CDC/504 loan presents businesses with fixed-rate, long-term financing for getting important assets such as real estate and long-term equipment or to renovate or construct office space. The maximum amount of a CDC/504 loan also is $5 million.
Other SBA financing products include disaster loans, express lines of credit as much as $350,000 and a microloan program as much as $50,000.
How To Apply
As with any other business loan, small business owners looking for an SBA loan need to provide specific documents to a lender and fill out an application. The various required objects include:
- Personal financial statements
- Business profit and loss statements
- Business licensing/certificates
- List of debts
- Income tax returns both personal and business
- Resumes for main team members
- Business plan
The Small Business Administration also recommends small business owners need to be prepared to answer some questions, such as:
- Why you need this loan and how will it be used?
- What types of resources need to be purchased, and who are your suppliers?
- Who’re your creditors and what other business debt do you’ve?
To find an experienced SBA lender in your region, speak to different business owners in your neighborhood and look for one that is part of the SBA’s Preferred Lender program. The PLP provide some lenders authority to approve loans based on the selected loan program. If you need more information, visit www.sba.gov.
An SBA loan can be an excellent thing for small businesses to get access to capital when a conventional loan might not be possible.